Car wars bring an unwelcome boom

AT THE Lexus dealership in downtown Greenwich, on Connecticut's high-income Gold Coast, east of New York, business in the last few days has been unusually brisk. "I would say we're about 20 per cent up on normal," said owner Sam Scatterday. But there was only half a smile on his face.

Mr Scatterday, whose immediate neighbour is the New York area's only Rolls-Royce showroom, could do without his boomlet. It has been triggered by the latest turn in the new trade war between the US and Japan over cars - the Clinton administration's threat of 100 per cent tariffs on 13 brands of luxury Japanese models, including those in the Lexus range.

Customers who may have been hesitating have been rushing to beat the putative tariffs all around the country. Among them was Jim Pagiatiakis, who bought a new Lexus LS400 saloon on Wednesday for $56,550 (pounds 36,000). If the tariffs are applied, its price could rise to more than $80,000. "This more or less pushed us into it. It got us acting," he said.

Aimed at Lexus, the flagship division of Toyota, at Nissan's Infiniti saloons, as well as at some top-range models from Honda, Mazda and Mitsubishi, the tariffs came into effect at one minute past midnight yesterday, but will only have to be paid retroactively from 28 June if no settlement is reached in the meantime.

Both Toyota and Nissan have promised for the time being to absorb any new duty costs and retain current prices. In full-page newspaper advertisements at the end of the week, Toyota wrote an open letter to Lexus customers. "Please be assured that it's business as usual at your community's Lexus dealership," it said. The Lexus brand, it went on, "is here to stay".

But the dealers themselves, who will converge on Washington today to lobby Congress and the White House against the Clinton strategy, say that imposition of the tariffs would instantly make their cars unsaleable. Looking about his gleaming property on Friday, Mr Scatterday was clear it would put him out of business and force him to lay off his 60 employees.

"It would be an absolute tragedy," he said, arguing that the measure would end up punishing more American workers than Japanese. While hundreds of US dealerships would close, the Japanese manufacturers would simply sell the 200,000 cars affected elsewhere. European luxury car-makers such as BMW, Mercedes and Jaguar, not American firms like Cadillac and Lincoln, would benefit, he said.

At a Mercedes-Benz showroom in Manhattan, Joseph Agrete, cheerfully agreed. "It will bring an influx of business should the tariffs go up 100 per cent, no question," he said.

There is still time for one or both sides to blink. Mr Scatterday believes a settlement will be announced at the Group of Seven summit in Halifax, Novia Scotia, next month: "Both the US and the Japanese need to negotiate a settlement. They have to."